Computer/Information Services and Australia’s Path to a Future Made in Australia

John H Howard, 8 May 2025

It is now well understood by innovation policy analysts and advisers that, on many fronts, Australia stands at a pivotal crossroads in its innovation journey.

The nation’s future prosperity will depend less on the minerals it digs up from the earth or the crops it grows, but increasingly on the code it writes, the data it harnesses, and the digital solutions it exports to the world.

Computer and information services (CIS)—encompassing everything from software development and cloud computing to artificial intelligence and data analytics—are already a major pillar of the Australian economy. Yet, as global competition intensifies and the world’s economic centre of gravity shifts towards digital industries, Australia must ask: is it doing enough to secure its place as a leader in this space?

Specifically, the scope and coverage of CIS in ANZSIC covers—

• Software Development - Both custom software development for specific clients and packaged software creation for wider distribution

• Cloud Computing - Including Infrastructure as a Service (IaaS), Platform as a Service (PaaS), and Software as a Service (SaaS) offerings

• Artificial Intelligence - Covering AI system development, machine learning implementations, intelligent automation, and AI consulting services

• Data Analytics - Including big data processing, business intelligence solutions, predictive analytics, and data visualisation services

The classification is intentionally comprehensive to capture the rapidly evolving technology landscape. While the core ANZSIC framework provides the structural foundation, the interpretation and application of these categories have evolved to include emerging technologies like blockchain that weren't as prominent when the classification system was initially developed.

The Opportunities and Challenges for CIS in the Australian Economic and Industrial Landscape

The contribution of Computer and Information Services to Australia's economy is significant and growing. Software development, data analytics, artificial intelligence, and cloud computing services have become essential for every industry, from healthcare to manufacturing, mining to agriculture. The sector's employment growth consistently outpaces most traditional industries, creating high-value knowledge jobs that are increasingly critical to Australia's economic future.

Its direct impact is visible through thriving homegrown tech companies such as Atlassian and Canva, and the vibrant innovation hubs emerging in cities across the nation. These companies and clusters are magnets for talent, investment, and ideas, helping to position Australia as a regional leader in digital innovation. But its overall impact is largely invisible, or hidden, particularly in the software embedded in almost every aspect of Australia's economic and industrial framework.

Software is structured instructions written in programming languages that enable computing functionality across virtually any device containing a processor. These digital instructions power everything from the obvious (laptops, servers) to the less visible but equally critical embedded systems that permeate almost every aspect of modern life.

Software has become a foundational element of the modern economy, transforming business models and creating new value chains. The ability to understand, create, and leverage software increasingly determines economic competitiveness for entrepreneurs, organisations, and nations.

Industry Structure and Value Capture Challenges. Australia's tech ecosystem suffers from a fundamental imbalance that limits its CIS potential. Despite hosting over 7,000 local software development firms, the nation struggles to capture maximum economic value due to a clear structural pattern: multinational technology companies primarily establish sales and support operations in Australia while developing their most valuable intellectual property in overseas tech hubs.

This division creates a value leakage problem: Australia provides the market but misses the highest-value activities in the technology value chain. Though multinationals contribute meaningfully to local employment and skills development, the most intellectually intensive and economically valuable work—product development, advanced R&D, and IP creation—predominantly occurs offshore.

Encouragingly, the economic calculus is shifting. The historical cost disadvantage that drove technology work offshore (mirroring manufacturing's earlier decline) has significantly narrowed. Rising global tech wages combined with Australia's stable business environment now make domestic development increasingly viable, creating a strategic opportunity to recapture higher-value technology activities and strengthen the nation's digital economy foundation.

Skills Landscape and Talent Pipeline. Australia's CIS skills landscape presents a paradox of both strengths and critical gaps:

• The country produces a substantial cohort of technology graduates annually, but industry demand consistently exceeds supply

• Women remain significantly underrepresented in the CIS workforce, compared to their participation in the overall economy

• Regional areas face acute digital skills shortages, with CIS roles heavily concentrated in capital cities

• Mid-career transitions into CIS fields are hampered by limited pathways and recognition mechanisms

Skills Australia projects that without intervention, the digital skills gap will continue to widen, potentially constraining growth across the entire CIS sector and limiting Australia's ability to compete internationally. This solution to this problem requires business and industry leadership in developing capabilities, drawing on offshore best practice.

Research and Commercialisation Dynamics. Australia's research base in computer science and information technology is internationally competitive, with the country producing a disproportionate share of global research publications in these fields relative to population size. However, translating research discoveries into commercial applications and policy frameworks continues to face significant delays and barriers, creating a persistent gap between scientific advancement and real-world implementation that limits economic and societal benefits. For example:

• Australia ranks poorly globally for industry-university collaboration in CIS fields

• Only a small fraction of Australian computer science research papers include industry co-authors, compared to much higher rates in the United States and Israel

• The average time from research publication to commercial application is nearly twice as long in Australia as in leading innovation ecosystems

This adoption, application, and implementation gap represents both a challenge and an opportunity for policy intervention to better translate Australia's research excellence into economic, social, and environmental outcomes. These gaps reflect well-known problems associated with technology diffusion and absorptive capacity.

Emerging Competitive Dynamics. The global landscape for CIS is becoming increasingly competitive, with nations deploying strategic policies to capture market share:

• Singapore has positioned itself as Asia's digital gateway through targeted tax incentives and infrastructure investments

• India has leveraged its large talent pool to dominate in IT services exports

• Israel has established global leadership in cybersecurity through defence-commercial collaboration

• Canada has successfully attracted major AI research labs through aggressive talent strategies and dedicated innovation corridors

Against this backdrop, Australia's competitive position remains promising but vulnerable. The country's stable business environment, strong rule of law, democratic governance, and high quality of life provide advantages for talent attraction, but policy fragmentation and underinvestment in strategic digital capabilities threaten to erode these advantages over time.

As global competition intensifies and CIS becomes the primary enablers for national economic competition, Australia must address these structural challenges to secure its position as a leading digital nation. The opportunity is substantial, with the potential to significantly increase the sector's contribution to GDP by 2030, but realising this potential will require deliberate policy choices and strategic investments that go beyond the current approach.

The Coverage of Computer and Information Services in the Future Made in Australia Initiative

The Albanese government's $22.7 billion Future Made in Australia (FMiA) strategy aims to position Australia as a renewable energy superpower and a hub for advanced manufacturing. However, investment in CIS is not mentioned specifically in Australia's Future Made in Australia National Interest Framework, although there are a few related mentions:

• Critical Technologies: The document briefly mentions that "the Government will continue to invest in emerging critical technologies which will create opportunities to transform a wide range of sectors across the economy." It notes that in the Critical Technologies Statement, the government has "prioritised action on AI, robotics and automation and quantum technologies among other fields." However, this is referenced in the "Other complementary frameworks" section, meaning these technologies aren't directly addressed through this specific National Interest Framework.

• Research and Innovation: The document acknowledges the importance of Australia's "existing strengths in research and development" as part of the country's advantages, and notes that public investment should focus on "establishing strong incentives for the private sector to invest in innovation activities that have broad public benefits." However, it doesn't specifically highlight software or digital innovation as priority areas.

• Digital Transformation: The document identifies "technological and digital transformation" as one of the five domestic and global forces shaping Australia's economic growth, but doesn't elaborate on specific software or computer systems initiatives within this framework.

The National Interest Framework appears primarily focused on physical industries related to renewable energy, critical minerals, and manufacturing rather than digital or software industries. The absence of any substantive focus on software, digital platforms, and information systems is a critical blind spot in the FiMA strategy: some have referred to this as analogue leadership in a digital world.  

This omission is particularly striking given that software infrastructure underpins every aspect of industrial competitiveness in the modern economy. The renewable hydrogen, green metals, and critical minerals processing industries highlighted in the framework all depend on sophisticated digital systems for optimisation, integration, and security. As other nations recognise digital sovereignty as a cornerstone of economic resilience, Australia's framework emphasises physical supply chains while overlooking the equally crucial digital value chains that control them.

The framework's silence on software capabilities reflects an outdated economic perspective that artificially separates digital innovation from industrial policy. This has a long history in Australia’s Ministerial responsibilities and the Machinery of Government. In today's economy, these domains are inseparable—software doesn't merely support industrial processes; it defines their capabilities and competitive advantage. Advanced manufacturing, renewable energy systems, and resource optimisation all operate at the intersection of physical and digital innovation.

As Australia positions itself for the future global economy, the National Interest Framework would be significantly strengthened by recognising software development, digital platforms, and data infrastructure not merely as adjacent considerations but as foundational capabilities essential to success in every priority sector. Without addressing this digital dimension, Australia risks building yesterday's industries with yesterday's tools while competing against economies that have fully integrated digital capabilities into their industrial strategies.

The Innovation Imperative: Why CIS Matters for a Future Made in Australia

Without a deliberate effort to integrate CIS into the heart of the FMiA Australia risks building the factories of the future while outsourcing their digital brains. The path forward must recognise that software capability is not merely adjacent to hardware priorities—it is the essential foundation upon which any Future Made in Australia must be built.

It follows that CIS should be formally embedded in the FMiA’s National Interest Framework through a Digital Enablement stream to complement the existing Net Zero Transformation stream and the Economic Resilience and Security stream and ensure that CIS receives the attention and funding it requires. This stream would specifically give priority to:

• Backing Australian ideas in digital and science: Supporting innovation, research, and the commercialisation of digital technologies.

• Critical technologies: Investing in areas such as cybersecurity, artificial intelligence, quantum computing, and other digital infrastructure that underpin economic resilience and future competitiveness.

• Skills in priority sectors: Developing a digitally skilled workforce to support emerging digital industries and ensure Australia’s competitiveness.

• Digital transformation of industry: Facilitating the adoption of advanced digital tools, automation, and data-driven processes in key sectors to improve productivity and resilience.

• Strengthening supply chain security: Using digital solutions to enhance transparency, traceability, and responsiveness in critical supply chains.

The government’s Critical Technologies List should also be used to prioritise areas like AI, IoT, and quantum computing in FMiA funding decisions.

Conclusion: A Future Built on Bits and Bytes

Computer and information services are not just another sector of the economy; they are the central nervous system of modern Australia. The intersection of digital capabilities and industrial policy is a critical consideration for economic and industrial frameworks into the future. The FMiA strategy, if it is to succeed, must recognise CIS as a core pillar of national innovation and resilience.  

The Albanese government must recalibrate its approach. By incentivising domestic innovation, bridging the digital divide, and aligning procurement with national capabilities, Australia can move from being a consumer of global technology to a creator and exporter of digital solutions. This will not only drive economic growth and job creation but also ensure that Australia’s future is truly made at home.

CIS should be fully integrated into the Future Made in Australia strategy through a dedicated Digital Enablement stream, supported by significant investment in R&D, talent, and industry collaboration. Without this, Australia risks building the infrastructure of tomorrow while relying on the innovation of others. The opportunity is clear: a Future Made in Australia must be a future built on digital foundations.

The Acton Institute for Policy Research and Innovation advances public policy through evidence-based research and expert analysis, focusing on science, technology, and innovation. Led by Dr John Howard, the Institute delivers practical policy solutions and fosters learning and adaptation to improve public outcomes in Australia’s innovation system